Accrual?

revenues?
expense
Service business
merchandising business
Give specific
accounts
 What do you think are the roles of
these accounts to the Statement of
Comprehensive Income?
ACTIVITY
(5 minutes)
Prepare your personal Statement of
Comprehensive Income
 a. Get a ¼ piece of paper.
b. Write your monthly
allowance
(computed by daily allowance x
number of days in a month)
 c. Write the amount you
spend on food,
transportation, phone load,
etc.
 (make it monthly to match
your allowance)
 d. Deduct the amount you spend
from the amount of your
allowance.
 e. Associate allowance with
revenue and spending with
expense with the net amount as
net income
 STATEMENT OF
COMPREHENSIVE
INCOME (SCI)
 (Income Statement)
 STATEMENT OF COMPREHENSIVE INCOME –
(Income Statement)
Contains the results of the company’s past
performance/operations for a specific period of time.
 net income – positive result
Net loss – negative result
 This can be prepared for a month, a
quarter or a year.

Haddock, Price, & Farina, 2012

REVENUES

Frias and Pefianco, FABM2

 Revenues are Sales or Service Income

from sale of company products and
services.
 REVENUES
Frias and Pefianco, FABM2

 Represents what a company’s

customers pay for its goods or
services.
 Rewards of doing business
Sales-the total amount of revenue that the company
was able to generate from selling products
iContra revenue –

(REDUCTION from Sales)

• opposite side of the sales account.
• sales account is on the credit side while the
reductions to sales accounts are on the debit side.
Sales returns –debited to record returns of
customers or allowances for such returns.

• occurs when customers return their products

for reasons such as but not limited to defects or
change of preference.
Sales discount – discounts given to customers who
pay early are recorded or cash discount.

different from trade discounts which are given

when customers buy in bulk.
ILLUSTRATION:

Sales ₱ 500
Less:
Sales Returns and Allowances ₱ 5
Sales Discounts 10 15
Net Sales 485
COST and EXPENSES

 are direct cost of the products sold or

services rendered.
 Sacrifices required to attain revenues
COST and EXPENSES

 Outflows of assets arising from

delivering or producing goods,
rendering services, or carrying out
other activities.
Contra Purchases – (DEDUCTION)

• account that is credited being

“contrary” to the normal balance
of Purchases account.
a. Purchase discount – used to record early
payments by the company to the suppliers of
merchandise.
b.Purchase returns – used to record
merchandise returned by the company to
their suppliers. This is how buyers see a sales
return recorded by their supplier.
c.Freight In –

costs of merchandise purchased by the

company.

Freight in is recorded when goods are

transported into the company.
COST of Sales or cost of services

 Direct cost of the products sold or

services rendered
 Cost of Goods Sold – actual cost of
merchandise that the company sold during
the year.

Beginning inventory – amount of inventory

at the beginning. It is also the amount of
ending inventory from the previous period.
Purchases – amount of goods
bought during the current
accounting period.
SALARIES EXPENSES

 Includes salaries of employees for

services rendered
UTILITIES EXPENSES

 Iincludes telephone, water and

electricity used
RENT EXPENSE

 includes rental for the use of

equipment, office, building, and land
spaces owned by others.
SUPPLIES EXPENSE

 includes laboratory, medical and

office supplies used.
TRANSPORTATION EXPENSE

 Includes fare for trips and travels;

cost of gasoline and oil used for
company vehicle
DEPRECIATION EXPENSE

 Includes portion of the cost

ofbuilding and equipment allocated to
one accounting period
INTEREST EXPENSE

 Includes interest on debts .or

monetary obligations.
REPRESENTATION EXPENSE

 Includes amount paid to restaurants,

hotels for treating customers and
others.
Differentiate revenues and
expenses; accrued income
and accrued expense
 What are the
accounting elements
used to determine net
income or net profit?
Temporary or nominal accounts are
the accounts found under the SCI
whose balances are transferred to
the capital account, thus having only
temporary amounts and resulting to
zero beginning balances at the
beginning of the following year.
Temporary or nominal accounts are
the accounts found under the SCI
whose balances are transferred to
the capital account, thus having only
temporary amounts and resulting to
zero beginning balances at the
beginning of the following year.
 ASSESSMENT:

:1. Name and define in your own

words the accounting elements used to
determine net income. (4 pts
ASSESSMENT:

2. What is the primary expense

associated with products sold by
merchandisers or manufacturers?
(1pt)
 3. Differentiate accrued
ASSESSMENT:

income from accrued expense.

Give example for each
item(4pts)
4. Describe Statement of
Comprehensive Income. (3 pts)
GOD BLESS YOU
